What Does Communist China Seek in the Ukraine Crisis?

What Does Communist China Seek in the Ukraine Crisis? China’s geopolitical and economic objectives in Ukraine

Communist China is engaged in a high-wire balancing act with respect to the Russian invasion of Ukraine that includes providing moral support to its ally Russia, expanding lucrative bilateral trade with Ukraine, making bank by reselling Russian oil and gas to Europe, and retaining diplomatic credibility with the rest of the world. Will the Chinese Communist Party be able to achieve its objectives (it has other selfish motives, as well)?

At first glance, Russia and China are allies according to the joint statement announced to the world made on 4 February, entitled “Joint Statement of the Russian Federation and the People’s Republic of China on the International Relations Entering a New Era and the Global Sustainable Development” (posted here in English). The joint statement conveys their joint opposition to “further enlargement of NATO” and “color revolutions.” Although unnamed, that is a direct reference to Ukraine, as Ukraine is seeking NATO membership and incurred its own color revolution in 2014.

Russia would thus expect some degree of geopolitical and diplomatic support from China for its invasion of Ukraine. Chinese support has manifested in abstaining from the UN Security Council resolution condemning Russia’s invasion of Ukraine, as reported by ABC News here. Russia vetoed it, of course, while eleven countries voted in support and only two other countries abstained: India and the United Arab Emirates. Other de facto Chinese support involves not condemning Russia’s aggression in official diplomatic statements. This provides the Russians with some geopolitical “top cover” moving forward.

Communist China also provided tacit support to Russia by abstaining in a UN Security Council resolution aimed at condemning Russia’s annexation of four former Ukrainian provinces, as noted by Al Jazeera on 1 October here.

Here are a few old headlines from official Chinese media about Ukraine (the CCP party line via state-run Chinese media has been consistent to this very day):

  • Xi pressures Putin to negotiate on Ukraine (Beijing Daily, 26 Feb)
  • China upholds dialogue as the way to resolve the Ukraine conflict (China Daily, 27 Feb)
  • Ukraine-Russia talks must be encouraged (China Daily, 28 Feb)
  • May peace return to Ukraine (People’s Daily, 28 Feb)
  • Swift: ejecting Russia is largely symbolic (Beijing Daily, 1 Mar)

No chastising of Russia, focusing only on dialog, negotiation, and “peace.” No suggestion of sanctions that should be applied to Russia. In fact, one editorial downplays one sanction action in play by arguing that the SWIFT sanctions implemented by the European Union are essentially meaningless. [SWIFT: Society for Worldwide Interbank Financial Telecommunication]

Why would communist China be as seemingly noncommittal in supporting Russia’s “Ukraine adventure” as it has been up to this point? Because the CCP has a number of geopolitical and economic objectives in Ukraine that complicate their decision-making process.

One motivation for the equanimity being projected by Beijing during this crisis is the CCP’s goal to displace United States leadership on the world stage. It is no secret that China seeks to implement a CCP-dominated “new world order” centered around Beijing’s leadership in all spheres of human endeavors. Chinese leader Xi Jinping is continuously promoted as a world leader by Chinese media and the diplomatic corps while undermining the US by pushing for a bipolar world and multilateral solutions for problems. US democracy and alliances are criticized at every opportunity as part of the ongoing CCP information warfare aimed at undermining the present US-backed international order. The CCP seeks to exploit the Russo-Ukrainian war to demonstrate reasonable Chinese leadership in helping to resolve the conflict. Their task is made easier by the absence of aggressive Biden regime leadership at this point.

A principal CCP economic objective is to maintain Ukraine as a key entry point to Europe and a logistics hub for China’s Belt-Road Initiative. Unbeknownst to many Americans, China has displaced Russia as Ukraine’s top trading partner since 2019. From this Al Jazeera report last week, “[T]rade between China and Ukraine has [reached] $15.4bn in 2020 and nearly $19bn in 2021, according to the Ukrainian government’s customs data.” China also has its sights squarely focused on accessing Ukraine’s abundant natural resources. Ukraine has an estimated 5% of all of the world’s mineral resources and is the world’s 3rd largest exporter of iron ore, 4th in titanium exports (largest deposits in Europe), 4th in corn exports, 8th in wheat exports, 7th largest in coal production, and among the top ten in producing manganese. China does not want the Russo-Ukrainian war to interrupt bi-lateral trade with Ukraine!

Another major Chinese economic objective is to continue – and indeed expand – bilateral trade with Russia. The two partners – with Russia doing the exporting and China doing the importing – concluded a US$400 billion gas deal in 2014, a second deal signed this year for 10 billion cubic meters of gas per year for 25 years, a new deal signed this year for 100 million tons of coal, and planning in process for another 50 billion cubic meters of gas per year. Their bilateral trade reached $104 billion in 2020, and Russia will be increasingly pushed to expand that trade as European Union and US sanctions begin to take effect. The big question is whether resource-poor China would choose to violate those sanctions in order to increase the importation of Russian hydrocarbons and other natural resources.

Those sanctions apparently have no teeth these days, as the Chinese are reselling Russian oil and gas to Europe at a hefty premium! The Europeans are happy to get the hydrocarbons and are looking the other way about Chinese violations of sanctions on Russia. Economic benefit to the communists! Objective achieved!

A long-term Chinese goal is to replace the US dollar with the yuan as the world’s primary reserve currency. A major element of the Chinese strategy is replacing the US petrodollar with the “petroyuan.” Created in 1945 through a US-Saudi Arabia agreement, the petrodollar assigns the US dollar as the common benchmark for trading oil on the world’s markets. Consider that China is a known currency manipulator. If the yuan ever replaces the dollar as the primary reserve currency and the standard for trading oil, then the CCP will gain enormous geopolitical and economic leverage over the entire world. With SWIFT-related sanctions being imposed on the Russian Central Bank and other Russian banks, Russia may be pushed to export oil and gas under China’s Cross-Border International Payments System (CLIPS), as Asia Times speculated on 25 February. If Russia shifts to the CLIPS lifeline, “the decoupling of Russia and China from the US dollar would be accelerated. Both countries are already working on competing payment systems.” That amounts to “de-dollarization” and a shift to the yuan – exactly in line with China’s goal.

Conclusion. Communist China has complex and intertwined geopolitical and economic goals associated with the ongoing Russo-Ukrainian war. Although China and Russia are allies and significant trade partners, the Russian invasion of Ukraine is disrupting the world’s oil and gas markets and Ukrainian-Chinese trade. Energy-poor China seeks stable supplies of hydrocarbons from Russia that could be disrupted by US and EU sanctions on Russian gas and oil exports, but they are not averse to making on killing in reselling Russian oil and gas to Europe at a premium.

Finally, Russian aggression is strengthening NATO/EU integration, fortitude, and resolve – although that unity is beginning to fracture with the coming of winter and energy resources in short supply. Nevertheless, many EU nations have historical reasons to distrust the Russian bear. That newly found fortitude and resolve are the last things communist China wants to see coalesce as the CCP contemplates the cost-benefits of a cross-channel amphibious assault of Taiwan.

How will China balance these competing interests in pursuit of its national objectives while preserving the “domestic stability” it so highly prizes? That ultimate objective may elude the communists. All eyes on the Taiwan Strait after the conclusion of the 20th Congress of the Communist Party of China that starts this weekend!

The end.

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